Order Code RL34103

Sugar Policy and the 2007 Farm Bill

Updated November 5, 2007

Remy Jurenas
Specialist in Agricultural Policy
Resources, Science, and Industry Division
 Sugar Policy and the 2007 Farm Bill

Summary
Congress is expected to decide the future of the U.S. sugar program in the
omnibus farm bill this year. Growers of sugar beets and sugarcane, and processors
of these crops, favor continuing the structure of the current sugar price support
program but seek changes to enhance their position in the U.S. marketplace. Food
and beverage manufacturers that use sugar want Congress to address their concerns
about the impact of sugar prices and program features that restrict supplies.

The sugar program is designed to guarantee the price received by sugar crop
growers and processors and to operate at “no cost” to the U.S. Treasury. To
accomplish this, the U.S. Department of Agriculture (USDA) limits the amount of
sugar that processors can sell domestically under “marketing allotments” and restricts
imports. At the same time, USDA seeks to ensure that supplies of sugar are adequate
to meet domestic demand. No cost is achieved if USDA applies these tools in a way
that maintains market prices above minimum price support levels. Should prices fall,
processors who take out loans have the right to hand over as payment sugar that had
earlier been pledged as collateral. USDA treats this as a cost.

Beginning in 2008, sugar imports from Mexico no longer will be restricted

under rules of the North American Free Trade Agreement. Also, additional amounts
will be allowed entry under other free trade agreements. Both the Congressional
Budget Office (CBO) and USDA project that, if the sugar program continues without
change, the additional imports will bring prices down below support levels and make
it attractive for processors to default on price support loans. With loan defaults
representing a cost, USDA would not be able to operate a no-cost program.

To address any U.S. sugar surplus caused by imports, both the House and Senate
farm bills (H.R. 2419 and S. 2302) would mandate a sugar-for-ethanol program.
USDA would be required to purchase as much U.S.-produced sugar as necessary to
maintain market prices above support levels, to be sold to bioenergy producers for
processing into ethanol. USDA funding would be open-ended for this program.
Other provisions would increase minimum guaranteed prices for raw sugar and
refined beet sugar, and tighten the rules (i.e., remove discretionary authority) that
USDA exercises to implement marketing allotments and/or administer import quotas.
One main difference is that the Senate bill would increase loan rates by some 6%-7%
compared to the House measure’s near 3%. Though CBO scores some savings with
the ethanol program, all sugar-related provisions will cost about $650 million over
5 years and up to $1.3 billion over 10 years.

These provisions reflect the proposals suggested by sugar crop producers and
processors. Food and beverage manufacturers that use sugar oppose the proposed
sugar provisions, arguing that costs to consumers would increase and that new
requirements would restrict the flow of sugar for food use in the domestic market.
USDA officials have also criticized the proposed guaranteed price increase, the new
sugar-for-ethanol program, and the new limits placed on managing sugar imports.
This report will be updated to reflect key developments.
Contents
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Overview of Sugar Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Issues in Current Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Level of Sugar Price Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Controlling Sugar Supply to Protect Sugar Prices . . . . . . . . . . . . . . . . . . . . . 3
Import Quotas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Marketing Allotments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sugar for Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sugar Program Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Senate Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

List of Tables
Table 1. Annual U.S. Sugar Import Commitments When the 2002 Farm Bill
Was Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Outlays or Receipts of the Sugar Program under the
2002 Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table 3. CBO’s Projection of Sugar Program’s Cost under House and Senate
Farm Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

For more information, please see the following CRS product:

CRS Report RL33541, Background on Sugar Policy Issues, by Remy Jurenas.

 Sugar Policy and the 2007 Farm Bill

Recent Developments
On October 25, 2007, the Senate Agriculture Committee reported out its farm
bill (S. 2302), which, among its many provisions, authorizes a sugar program for the
2008 through 2012 crops of sugar beets and sugarcane. Major changes to current
policy would include increasing loan rates (used by the U.S. Department of
Agriculture (USDA) to derive the price level guaranteed to processors) by 6% to 7%,
mandating that the U.S. sugar production sector receive a minimum 85% share of the
U.S. sugar market, and creating a sugar-for-ethanol program to serve as an outlet for
sugar determined to be in surplus due to increased imports, expected primarily from
Mexico.

Overview of Sugar Program

The current sugar program is designed to guarantee the minimum price received
by growers of sugarcane and sugar beets, and by the firms (raw sugar mills and beet
refiners) that process these crops into sugar. To accomplish this, the U.S.
Department of Agriculture (USDA) limits the amount of sugar that processors can
sell domestically under “marketing allotments” and restricts imports. USDA is
required to operate the sugar program on a “no-cost” basis. This means USDA must
regulate the U.S. sugar supply using allotments, import quotas, and related authorities
so that domestic market prices do not fall below guaranteed minimum price levels.
These are set out in law as specified loan rates, which serve as the basis for effective
support levels. If the market price is below the support level when a sugar price
support loan comes due, its “non-recourse” feature means a processor can exercise
the legal right to forfeit, or hand over, sugar offered to USDA as collateral for the
loan in fulfillment of its repayment obligation. This report will focus on the issues
raised by the sugar program provisions in major bills and floor amendments. For
more information, see CRS Report RL33541, Background on Sugar Policy Issues.

Issues in Current Debate

This year’s consideration of future U.S. sugar policy to date has revolved around
four issues. These are raising the level of minimum price guarantees to be made
available to processors, how to use two tools to manage U.S. sugar supply,
authorizing any sugar surplus to be used as a feedstock for ethanol, and accounting
for projected program costs. Though industrial users of sugar in food and beverage
products initially explored converting the sugar program to operate similar to the
programs in place for the major grains, oilseeds and cotton, this policy option did not
receive further attention.
 CRS-2

Level of Sugar Price Support

USDA is required to extend price support loans to sugar processors that meet
certain conditions on passing program benefits to the farmers that supply them with
sugar beets or sugarcane. These loans are made at statutorily set loan rates,1 and
account for most of the effective support level made available to producers and
processors. USDA is required to use its other tools to protect this price guarantee.2
Loan rates for raw cane sugar have not changed since 1985; for refined beet sugar,
since 1992. These minimum prices have guaranteed producers of the sugar crops and
the processors that convert these crops into sugar a price that since the early 1980s
has ranged from two to four times the price of sugar traded in the world marketplace.

Both the House-passed and Senate-reported farm bills would increase loan rates,
but to different levels, over the five-year farm bill period. H.R. 2419 would increase
loan rates by almost 3% — from the current 18.0¢ to 18.5¢ per pound for raw cane
sugar, and from the current 22.9¢ to 23.5¢ per pound for refined beet sugar. S. 2302
would double this increase incrementally over four years — raising the raw sugar
loan rate to 19.0¢ per pound and the refined beet loan rate to 24.4¢ per pound, by
2012.3

Growers and processors had initially sought a one cent increase in the raw cane
sugar loan rate (with a corresponding increase in the refined beet sugar rate), and had
acknowledged their satisfaction with receiving half of their request in the House-
passed farm bill. They argued that the increase in the loan rate is needed to cover
increased production costs, particularly energy inputs. Sugar users have countered
that the House-proposed higher loan rates will increase costs to taxpayers by an
additional $100 million annually. They also note that while the bill’s ethanol
provisions (see “Sugar for Ethanol” below) “are supposedly designed to deal with
surpluses,” the loan rate increase “can only encourage higher surplus production.”4
The Bush Administration, in its statement of administration policy on the House farm
bill, opposed the increase in the loan rates for sugar.

1
For sugar, the loan rate is the price per pound at which the government will provide
nonrecourse loans to processors by the Commodity Credit Corporation (CCC). This short
term financing at below market interest rates enables processors to hold their commodities
for later sale.
2
The loan rates alone do not serve as the intended price guarantee, or floor price, for sugar.
In practice, USDA sets marketing allotments and import quota levels in order to support raw
cane sugar and refined beet sugar at slightly higher price levels. Each price level takes into
account the loan rate, interest paid on a price support loan, transportation costs (for raw
sugar), certain marketing costs (for beet sugar), and discounts. These are frequently referred
to as “loan forfeiture levels” or the level of “effective” price support.
3
The loan rate for refined beet sugar would reflect the requirement that it be set each year
equal to 128.5% of that year’s raw cane sugar’s loan rate.
4
Letter to Members of Congress, from food and beverage companies and trade associations,
and public interest groups, July 13, 2007.
 CRS-3

Controlling Sugar Supply to Protect Sugar Prices

The current sugar program uses two tools — import quotas and marketing
allotments — to ensure that producers and processors receive price support benefits.
By regulating the amount of foreign sugar allowed to enter and the quantity of sugar
that processors can sell, USDA can for the most part keep market prices above
effective support levels, meet the no-cost objective, and ensure that domestic sugar
demand is met. If successful, the likelihood that USDA acquires sugar due to loan
forfeitures is remote.

Import Quotas. The United States must import sugar to cover demand that
the U.S. sugar production sector cannot supply. However, USDA restricts the
quantity of foreign sugar allowed to enter for refining and/or sale to manufacturers
for domestic food and beverage use. Quotas are used to ensure that the quantity that
enters does not depress the domestic market price to below support levels. Quota
amounts are laid out in U.S. market access commitments made under World Trade
Organization (WTO) rules and under bilateral free trade agreements (FTAs).

The current sugar program accommodates, or makes room for, imports of up to

1.532 million tons each year. This import level is one of the four factors that USDA
uses to establish the national sugar allotment (called the “overall allotment
quantity”), and reflects U.S. trade commitments under two trade agreements in effect
when the 2002 program was authorized (Table 1).

Table 1. Annual U.S. Sugar Import Commitments

When the 2002 Farm Bill Was Enacted

short tons
World Trade Organization Quota (minimum) 1,256,000
North American Free Trade Agreement — Mexico 276,000
Quota (maximum) a
Total 1,532,000

a. Applies only through the end of calendar year 2007.

Beginning on January 1, 2008, U.S. sugar imports from Mexico will no longer
be restricted. However, they could fluctuate from year to year. First, the amount of
Mexican sugar exported to the U.S. market will depend largely upon the extent that
U.S. exports of cheaper high-fructose corn syrup (HFCS) displace Mexican
consumption of Mexican-produced sugar. Surplus Mexican sugar, in turn, would be
expected to move north to the United States. Second, Mexico’s sugar output, though
trending upward, does vary from year to year, depending upon weather and growing
conditions. Mexican government policy also is to hold three months worth of sugar
 CRS-4

stocks in reserve and to allow sugar imports when needed to meet demand and lower
prices.5

Also, the United States has committed under other existing and pending bilateral
FTAs to allow for additional sugar imports.6 Such imports in 2013, potentially the
fifth year that the sugar program authorized by the 2007 farm bill is in effect, could
total from about 420,000 tons to 1.215 million tons above existing WTO and
NAFTA/Mexico trade commitments. The wide range reflects two varying
assumptions on the extent to which HFCS use in Mexico might displace sugar
consumption in Mexico and create a surplus available for export to the U.S. market.

Legislation. The sugar program provisions in the House and Senate farm bills
do not directly address the issue of additional sugar imports. Instead, both propose
a new sugar-for-ethanol program to handle the price-related impact of such imports
(found in Section 9013 of the energy title in H.R. 2419, and in Section 1501 of S.
2302; see “Sugar for Ethanol” and “Program Costs” below). However, other
provisions prescribe how USDA would administer import quotas in two ways. To
cover shortfalls in what processors can sell (because of hurricanes or other disastrous
events) under allotments, USDA would be directed to ensure that most imports enter
in the form of raw cane sugar rather than refined sugar. While historically most
permitted imports have entered in raw form, USDA allowed large quantities of
refined sugar to enter after the late 2005 hurricanes significantly affected the ability
of cane refineries in Louisiana and Florida to process raw sugar. This provision is
intended to ensure that cane refineries (which process raw sugar into refined sugar)
can more fully use their operating capacity. Also, limiting the entry of refined sugar
would enhance the position of the domestic beet sector to increase their sales of
refined sugar.

However, only H.R. 2419 would direct USDA to regulate when and how much
raw cane sugar imports are allowed to be shipped to U.S. cane refineries. S. 2302
does not include this provision. While USDA announced shipping patterns in
FY2003-FY2005, the impact of the hurricanes led to a decision not to follow this
long-standing practice in FY2006-FY2007. USDA justified removing these
restrictions because of “changes occurring over time in the domestic marketing of
cane sugar.” This provision could be viewed as intending to increase the transaction
costs for countries that export smaller amounts of sugar to the U.S. market and giving
a slight competitive edge to domestic processors with respect to buyers. Food and
beverage firms oppose “micro-managing” the timing of imports, noting that the
application of such rules will limit the ability of cane refiners to efficiently use their
processing capacity and could lead to serious shortfalls at times in the amount of

5
U.S. sugar processors also will be free to export sugar to Mexico to take advantage of the
occasional higher prices there.
6
Most of the sugar access provisions in the Dominican Republic-Central American FTA
(DR-CAFTA) already are in effect. Congress has yet to consider the FTAs with Panama,
Peru, and Colombia, all of which would grant additional access for their sugar to the U.S.
market.
 CRS-5

sugar supplied to the market.7 In commenting on the House bill, the Bush
Administration also expressed concern over requiring shipping patterns for sugar
imports. Also, several countries eligible to ship sugar to the U.S. market expressed
concern that the proposed regulation of the flow of imports would run counter to U.S.
trade commitments.

Marketing Allotments. In the 2002 farm bill, the domestic production sector
accepted mandatory limits on the amount of sugar that processors can sell — known
as marketing allotments — in return for the assurance of price protection. It viewed
allotments as a way to try to capture any growth in U.S. sugar demand, and assumed
that the then-U.S. sugar import quota commitments would continue without change
(see “Import Quotas” above). The statute, however, stipulated that if USDA
estimates imports will be above 1.532 million short tons, then USDA must suspend
marketing allotments. Suspending allotments because of additional imports raises
the prospect of downward pressure on market prices if most U.S. sugar demand is
already met. If the additional imports were to cause the price to fall below support
levels, forfeitures would occur and USDA would be unable to meet the no-cost
requirement. Including the allotment suspension provision was designed to ensure
that USDA not lose control over managing U.S. sugar supplies for fear of the
consequences that could be unleashed (i.e., demonstrating its inability to implement
congressional policy).

Legislation. Implementation of the 2002 farm bill’s marketing allotment

authority has resulted in the U.S. sugar production sector’s share of domestic food
consumption ranging from a low of 73% in FY2006 to a high of 89% in FY2004.
Concerned with the prospect that their market share would decline as sugar imports
increase under various trade agreements (see “Import Quotas” above), sugar
producers and processors have decided to pursue a different approach. Both H.R.
2419 and the Senate Agriculture Committee-reported farm bill would guarantee that
the domestic production sector always benefits from a minimum 85% share of the
U.S. sugar for food market. USDA would be required to announce an “overall
allotment quantity” — the amount of sugar that all processors combined can sell —
that represents at least 85% of estimated sugar consumption. This is intended to
address the sector’s objective that imports not displace the ability of U.S. sugar
processors to sell more of their output in each successive year.

Sugar for Ethanol

Background. Sugar producers and processors have had an ongoing interest
in exploring the potential for using sugar crops and processed sugar as a feedstock
to produce ethanol (a gasoline additive). In the 2002-2003 period, they encouraged
USDA to explore selling forfeited sugar stocks to corn-based ethanol processors. A
few ethanol producers experimented by adding sugar to speed up the ethanol
fermentation process, but the results appear to have been disappointing.

In 2005, Congress approved the Dominican Republic-Central American Free

Trade Agreement (DR-CAFTA) that gives six countries increased access for their

7
Letter to Members of Congress, July 13, 2007.
 CRS-6

sugar to the U.S. market. During the debate, producers and processors sought a deal
with the Bush Administration on a sugar-for-ethanol package. Their objective was
to have the option available to divert additional sugar imports under DR-CAFTA
whenever domestic prices fall below support levels.8 With Congress mandating in
2005 that the use of renewable fuels be doubled by 2012,9 some have advocated that
sugar be considered as a feedstock along with other agricultural crops and waste.
Separately, Hawaii mandated (effective April 2006) that 85% of the gasoline sold
must contain 10% ethanol. This requirement assumes that over time, the sugarcane
produced on the islands will be used as the prime feedstock for ethanol.

If the cost of feedstock is excluded, producing ethanol from sugar cane can be
less costly than producing it from corn. This is because the starch in corn must first
be broken down into sugar before it can be fermented. This extra step adds to the
cost of processing corn into ethanol, when contrasted to using sugarcane or processed
sugar. Further, sugar cane waste (bagasse) can also be burned to provide energy for
an ethanol plant, reduce associated energy costs, and improve sugar ethanol’s energy
balance relative to corn ethanol.

Brazil’s success at integrating sugar ethanol into its passenger vehicle fuel
supply has stimulated interest in exploring prospects for sugar-based ethanol in the
United States. However, wide differences in sugar production costs and market
prices in the two countries cause the economics of sugar-based ethanol to differ
significantly. In investigating the economics of ethanol from sugar, USDA
concluded that producing sugar cane ethanol in the United States would be more than
twice as costly as U.S. corn ethanol and nearly three times as costly as Brazilian
sugar ethanol.10 Feedstock costs accounted for most of this price differential.11 The
USDA study showed that while sugar ethanol may be a positive energy strategy in
such countries as Brazil, it may not be economical in the United States.12

8
Though the Administration did not agree to such a package, the Secretary of Agriculture
pledged to divert surplus sugar imports — through purchases — for ethanol and other
non-food uses, to ensure that the sugar program operates as authorized only through
FY2008. For additional information, see “Sugar in DR-CAFTA — Sugar Deal to Secure
Votes” in CRS Report RL33541, Background on Sugar Policy Issues, by Remy Jurenas.
9
For more information, see CRS Report RL33564, Alternative Fuels and Advanced
Technology Vehicles: Issues in Congress, by Brent D. Yacobucci.
10
Office of Economics, The Economic Feasibility of Ethanol Production from Sugar in the
United States, July 2006.
11
In Brazil, the cost of producing raw cane sugar reportedly ranges from 6 to 9 cents per
pound (or 9 to 12 cents when converted to refined basis). In the United States, raw cane
sugar production costs range from 12 to 20 cents per pound; U.S. production costs for
refined beet sugar range from 17 to 33 cents per pound. For additional perspective, see
“Costs of Production and Sugar Processing” in USDA, Economic Research Service, Sugar
Backgrounder, July 2007, pp. 17-21.
12
This discussion is adapted from “Sugar Ethanol” in CRS Report RL33928, Ethanol and
Biofuels: Agriculture, Infrastructure, and Market Constraints Related to Expanded
Production, by Brent D. Yacobucci and Randy Schnepf.
 CRS-7

Legislation. Both the House-passed and Senate Agriculture Committee-

reported bills incorporate a proposal presented to the Agriculture Committees by the
U.S. sugar production sector. The “Feedstock Flexibility Program for Bioenergy
Producers” would require USDA to administer a sugar-for-ethanol program using
sugar intended for food use but deemed to be in surplus. USDA would sell both
surplus sugar that it purchases if determined necessary to maintain prices above
support levels, and the sugar acquired as a result of loan forfeitures, to bioenergy
producers for processing into fuel grade ethanol and other biofuel. Competitive bids
would be used by USDA to purchase sugar from processors, at a price not less than
sugar program support levels, which it would then sell to ethanol firms. USDA
would implement this program only in those years where purchases are required to
operate the sugar program at no cost. Open-ended funding would be provided by the
Commodity Credit Corporation, USDA’s financing arm. This new program would
take effect in FY2008, one year prior to the expiration of current sugar program
authority.

Because it would cost much more to produced ethanol from U.S.-priced sugar
than from corn, this new program would require a considerable subsidy to operate as
intended. The prime market for such sugar likely would be existing and planned
corn-based ethanol facilities close to sugar beet and sugarcane producing areas (e.g.,
the Upper Midwest and Hawaii). Producers of ethanol from corn in the continental
United States, though, would likely need to adjust their fermentation process and/or
invest in new equipment to handle sugar. As a result, they may not be as interested
in purchasing sugar as a feedstock unless the price is significantly discounted further
(e.g., requiring even more of a subsidy) to reflect the additional costs of processing
sugar instead of corn. However, the availability of this subsidy could facilitate the
development of the ethanol sector in Hawaii and partially reduce the islands’
dependence on importing gasoline for its vehicle transportation needs. CBO
estimates that this feedstock program would increase demand for sugar and slightly
reduce the cost of the sugar program itself (see “Program Costs” below).

As designed, this program would rely on U.S.-produced (rather than foreign)

sugar. The amount that USDA decides to purchase would approximate its estimate
of the extent that imports under trade agreements reduce the U.S. sugar price below
support levels. Producers support this provision, viewing it as an insurance policy
for receiving the benefits of a guaranteed minimum price for sugar marketed for food
use. Sugar users oppose this program “to ostensibly manage surplus supplies.” In
their July 13th letter to Members of Congress, they argued that this authority “will
likely be used to short domestic markets, further restricting the availability of sugar
for food use in the U.S. market.” They characterized this approach as “wasteful of
taxpayer resources” because sugar is not price competitive with corn as a feedstock,
and will require large subsidies to ethanol producers “to induce them to accept the
sugar.”

Sugar Program Costs

USDA has succeeded in operating the sugar program at no cost for the years
covered by the 2002 farm bill. Though processors forfeited small quantities of sugar
in FY2004 and FY2005, USDA subsequently sold the acquired sugar to offset the
 CRS-8

earlier outlays.13 The net revenue, or sales proceeds (shown as receipts in some
years), were from the sale of acquired sugar (Table 2). The proceeds shown for
FY2003 reflected the sale of a significant amount of sugar acquired due to loan
forfeiture in FY2000 (under the previous farm bill’s sugar program provisions). In
looking at the current farm bill’s entire five year time period, sugar program
operations generated more than $100 million in revenue.

Table 2. Outlays (-) or Receipts (+)

of the Sugar Program under the
2002 Farm Bill

Fiscal Year millions of $

2003 + 84
2004 - 61
2005 + 86
2006 -10
2007 Estimate + 10
Total, 2003-2007 + 109

Source: USDA, Farm Service Agency, “CCC Net Outlays

by Commodity and Function,” June 2007.

Budget forecasts issued earlier this year projected that the sugar program, if
continued without change, would cost almost $700 million (CBO) to about $800
million (USDA) for the five years covered by the 2007 farm bill (FY2008-2012). For
the 10-year period (FY2008-2017), program outlays were projected at almost $1.3
billion (CBO) to $1.4 billion (USDA). These estimated outlays reflect the effect of
projected sugar imports from Mexico and other countries that have gained additional
access for their sugar under bilateral FTAs. Each cost projection assumed that
additional supplies depress the domestic sugar price below support levels, and lead
processors to forfeit on a portion of their loans.

Though the sugar price support and marketing loan provisions in both farm bills
(Section 1301 of H.R. 2419; Section 1501 of S. 2302) are intended to ensure that
USDA operates the program at no cost, CBO scores these provisions as increasing
program outlays by $84 million and $80 million, respectively, over five years, and
$167 million and $289 million, respectively, over 10 years. CBO projects that the
sugar-for-ethanol program (Section 9013 of H.R. 2419; Section 1501 of S. 2302)
would increase sugar demand and reduce the cost of the sugar price support program
by $107 million and $108 million, respectively, over five years and $240 million and
$287 million, respectively, over 10 years. Combining both proposed policy changes

13
The forfeiture of a price support loan results in a budget outlay, because the credit that had
been extended is not paid back by the processor (resulting in a loss to the U.S. government).
To the extent USDA succeeds in selling forfeited sugar, proceeds flow back to USDA and
reduce the loss.
 CRS-9

against CBO’s initial budget forecast, the net cost of the sugar-related provisions in
both bills would be about $650 million over five years and range from $1.2 billion
to $1.3 billion over 10 years (Table 3).

Table 3. CBO’s Projection of Sugar Program’s Cost under

House and Senate Farm Bills

H.R. 2419 S. 2302

CBO’s Effect of Total Projected Total Projected
Baseline Effect of
House Cost (Current Cost (Current
Projection Senate Farm
Farm Bill Law & House Law & Senate
(Current Bill Policy
Policy Farm Bill Farm Bill
Law) Changes
Changes Changes) Changes)
Period Outlays, in millions of dollars
5-Year Estimate:
682 -23 659 -28 654
FY2008-FY2012
10-Year Estimate:
1,287 -73 1,214 +2 1,289
FY2008-FY2017

Source: Derived by CRS from CBO’s March 2007 baseline projection, the detailed CBO
cost estimate published in H.Rept. 110-256, Part 1, accompanying H.R. 2419, July 23, 2007,
pp. 383, 392, and CBO’s cost estimate for the Senate Agriculture Committee’s reported farm
bill, November 1, 2007, pp. 7-8.

Senate Activity
The Senate Agriculture Committee approved its farm bill (S. 2302) on October
25, 2007, without making any changes to the sugar program provisions included in
the measure’s text considered during markup. The Senate plans to debate S. 2302
during the week of November 5 and possibly longer. Sugar-related amendments may
be offered on the floor. Tucked into their comprehensive farm bill proposals, S. 1872
(Durbin) and S. 2228 (Lugar) would instead extend current sugar program provisions
through 2012. Senators Lugar and Lautenberg have indicated their intent to offer S.
2228 as an amendment during debate.